Gomez v. Rossi Concrete

The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge

ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR CLASS CERTIFICATION

Plaintiffs Reynaldo Galvan, Juan Martinez, Andres Millan, and Zacarias Millan ("Moving Plaintiffs") have filed a motion for class certification [Doc. 35]. For the following reasons, the motion is GRANTED in part and DENIED in part.

I. BACKGROUND

This is a putative class-action suit by construction workers against their employer, Defendant Rossi Concrete, Inc.*fn1 Rossi Concrete is a concrete contractor that works mainly in Southern California. Plaintiffs allege a variety of employment-related claims against Defendants under both federal and state law.

Plaintiffs define the class as "[a]ll current and former employees of Employer, who have performed construction work on public works for Employer within four years of the filing of this Complaint."*fn2 They also want to certify several subclasses related to their causes of action. But they do not want to certify subclasses for all causes of action; they will pursue some claims individually. The Court therefore only discusses those claims for which Plaintiffs seek class certification.

1. ERISA Fiduciary-Duty Claims

Plaintiffs' first three causes of action are similar claims for ERISA fiduciary-duty violations.*fn3 Each cause of action relates to one of three ERISA benefit plans: Plan 1, Plan 2, and Plan 3.*fn4 Plaintiffs claim that Rossi Concrete and Mr. Rossi did not make enough contributions to all three plans, misstated the amount of contributions owed, and kept plan assets for themselves. And with respect to Plans 1 and 2 only, Plaintiffs allege Rossi Concrete and Mr. Rossi were imprudent and risked losses to the plans because they hired Benefit Synergy, an allegedly non-existent entity, as the plans' administrator.

Plaintiffs propose three subclasses, one related to each of the three plans. The Plan 1 Subclass comprises "participants, or former participants within the last four years, of the employee benefit plan defined as Plan 1 in the Complaint." The Plan 2 Subclass and Plan 3 Subclass have identical definitions, except they relate to Plans 2 and 3 as defined in the Complaint.*fn5

2. ERISA Termination

Plaintiffs' fifth cause of action relates only to Plan 1 and alleges that Rossi Concrete and Mr. Rossi failed to properly notify plan participants of their intent to terminate the plan. Plaintiffs claim Rossi Concrete and Mr. Rossi attempted to terminate Plan 1 as of August 15, 2007. Although participants and beneficiaries must get notice of the intent to terminate at least sixty days before the proposed termination date, 29 U.S.C. § 1341(a)(2), certain Plaintiffs allegedly did not get notice until about October 3, 2007. And the notice was in English, which Plaintiffs claim is not the first language of most of the Plan 1 Subclass. Their first language is mostly Spanish, according to Plaintiffs. So not only did Defendants allegedly fail to give notice in time, the notice was not "written in such manner as is likely to be understood by the participant or beneficiary." 29 U.S.C. § 1341.

Plaintiffs propose creating a Plan 1 Termination Subclass comprising "participants, or former participants within the last four years, of the employee benefit plan defined as Plan 1 in the Complaint who failed to receive timely notice of the termination of Plan 1 or notice in a language they understood."

3. Prevailing Wages

In their seventh cause of action, Plaintiffs claim that Rossi Concrete paid them less than the minimum prevailing wage required for public-works jobs under California law. A contractor on a public-works project must pay a prevailing per diem wage, which is set by the Department of Industrial Relations. See Cal. Lab. Code §§ 1770--71. In satisfying the prevailing wage, employers can either pay all cash wages or pay a combination of cash wages and benefits, like contributions to pension funds, healthcare, vacation, travel, and other fringe benefits. See id. at § 1773.1; WSB Elec., Inc. v. Curry, 88 F.3d 788, 791 (9th Cir. 1996). But even though employers can use their contributions to benefit plans to help meet the prevailing wage, Plaintiffs claim there is still a minimum cash wage that employers must pay. Plaintiffs call this minimum cash wage the base rate. See Cal. Lab. Code § 1773.1(c); WSB Elec., 88 F.3d at 791.

Plaintiffs' prevailing-wage claim has two parts. The first is that Plaintiffs allege Rossi Concrete failed to pay the correct base rate to its employees. And second, they allege Rossi Concrete took more credit than it should have for its employer contributions to benefit plans.

Plaintiffs seek to certify the base-rate and employer-contribution issues as class-wide issues relevant to two claims: the seventh cause of action for failure to pay the prevailing wage and the third cause of action for failure to contribute enough money to Plan 3.

4. Hours and Overtime

As part of their seventh cause of action, Plaintiffs also seek damages for failure to pay overtime wages. Although they plan to assert some of these claims individually, they want to certify a subclass of drivers who were allegedly required to drive company vehicles and had to report to Rossi Concrete's yard before going to the job site. According to Plaintiffs, these drivers should have been paid the prevailing wage for this travel time, but instead were paid only the minimum wage.

Plaintiffs propose a Driver Subclass, comprising "class members who were required to drive vehicles to and from jobsites as part of their employment with the Employer [Rossi Concrete]." The class issue related to the Driver Subclass is whether Rossi Concrete should have paid the prevailing wage, instead of the minimum wage, for required travel time.

5. Failure to Pay Wages Upon Termination

Plaintiffs' tenth cause of action seeks damages for Rossi Concrete's alleged failure to pay unpaid wages. Unpaid wages are due immediately if an employee is fired or gives a notice of resignation, Cal. Lab. Code §§ 201(a), 202(a), or within seventy-two hours in the case of resignation without notice, id. at § 202(a). If the employer willfully fails to pay the unpaid wages, an employee can get statutory damages. Id. at § 203(a).

Plaintiffs allege that Rossi Concrete willfully failed to pay unpaid wages upon termination. And they want to certify a Terminated Subclass comprising "those former employees in the Class who were terminated or left employment before the filing of this lawsuit."

Here, Plaintiffs base their UCL claim on their seventh cause of action, which alleges Rossi Concrete failed to pay prevailing and overtime wages, gaining an unfair advantage over its employees and competitors. This claim has the same factual issues as the seventh cause of action, and only adds a legal issue: whether those same facts would also be a violation of the UCL. And like the seventh cause of action, Plaintiffs seek certification of the UCL claim as a class-wide issue.

II. LEGAL STANDARD

On a motion for class certification, a court must generally take the substantive allegations of the complaint as true. In re Coordinated Pretrial Proceedings in Petroleum Prods. Antitrust Litigation, 691 F.2d 1335, 1342 (9th Cir. 1982). Rather than deciding whether the claims have any merit, the inquiry instead focuses on the "nature and range of proof necessary to establish those allegations." Id. But if the merits of the claims overlap with consideration of the Rule 23 factors, a court may look beyond the pleadings to ensure Rule 23's requirements are met. Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571, 594 (9th Cir. 2010). Thus, a court is not bound to accept a plaintiff's allegations as true if they relate to class certification issues. Id.

III. DISCUSSION

1. Supplemental Jurisdiction

Before turning to the requirements of Rule 23, the Court addresses Defendants' argument that the Court should not exercise supplemental jurisdiction over Plaintiffs' statelaw claims.*fn6 Courts may exercise supplemental jurisdiction over state-law claims that form part of the same case or controversy as the federal claims. See 28 U.S.C. § 1367(a). Even if a state claim forms part of the same case or controversy, a court may decline to hear the claim if it "substantially predominates over the claim or claims over which the district court has original jurisdiction." Id. at § 1367(c)(2). Supplemental "jurisdiction is a doctrine of discretion," City of Chicago v. Int'l Coll. of Surgeons, 522 U.S. 156, 172 (1997), and several factors influence whether a court should exercise supplemental jurisdiction: "economy, convenience, fairness and comity." Acri v. Varian Assocs., Inc. 114 F.3d 999, 1001 (9th Cir. 1997).

Defendants argue that the state-law claims predominate over the federal ones and the Court should decline to exercise jurisdiction over them. But Plaintiffs' ERISA claims, which allege Defendants failed to contribute enough to the ERISA plans, are interwoven with Plaintiffs' prevailing-wage state-law claim. And if Plaintiffs prove that Defendants took too much credit for their employer contributions, or if they otherwise failed to pay the correct prevailing wage, then they might be liable to pay additional amounts to the ERISA plan. So resolving the prevailing-wage issue is necessary to resolving the federal ERISA claims. As Plaintiffs correctly point out, if the Court split these causes of action, the Court would risk inconsistent rulings on the same issue-namely, whether Defendants correctly paid the prevailing wage. "Judicial economy weighs against bifurcated state and federal proceedings in these circumstances." Bamonte v. City of Mesa, No. 06cv1860, 2007 WL 2022011, (D. Ariz. July 10, 2007) (exercising supplemental jurisdiction over state-law overtime claims).

Defendants have another argument against exercising supplemental jurisdiction.

They argue that certifying a Rule 23(b)(3) class action on Plaintiffs' state-law wage claims would contradict the policy and procedures in the Fair Labor Standards Act ("FLSA"). Plaintiffs assert a federal claim for unpaid overtime wages under the FLSA.*fn7 FLSA claims can be asserted as collective actions, but the FLSA uses an opt-in procedure, which means a potential plaintiff only enters an FLSA case if he affirmatively chooses to opt in. 29 U.S.C. &sect; 216(b).*fn8 But Plaintiffs also assert similar state-law overtime wages claim for which they seek Rule 23 class certification. And Rule 23(b)(3)*fn9 uses an opt-out procedure, which means that plaintiffs are automatically part of the class unless they opt out. So there are two different types of procedures for collective action ...

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